Hey @ Elia I think the service cost is apart of net income and the unamortized gain would be in other comprehensive income. My thinking is the service cost will be apart of the expense but will not be shown net of income tax because it's a part of continuing operations. The service cost will create a deferred tax asset because the tax man will not recognize the loss even though you do, so he will tax more of your income than you do. Example below:
Service Costs Dr. 40,000
Pension Liability Cr. 40,000
Assuming a 30% tax rate
Deferred tax asset Dr. 12,000
Income tax – Deferred portion Cr. 12,000 This would be a part of income from continuing ops.
The gain from a change in actuary assumption, or amendment to the plan will be recorded in other comprehensve income and if memory serves me correct can be shown net of the tax, or in aggregrate combined.
So assuming a gain of 10,000 and 30% tax rate, I thinking it should be something like this:
Pension Asset/ Liabilty Dr. 10,000
Unrecognized Gain Cr. 7,000
Deferred Tax Liability/ or income tax payable (but im leaning deferred tax liability Cr. 3,000
Let me know if anyone disagrees. This was not convered in my review materials but i'm taking a shot at it.
@ NBAD Thanks. Were the questions in Wiley for governmental comparable to the exam? I found them kinda of easy and simple. They did not ask you very specific questions, so i'm worried i'm going to be in for a bad surprise come Saturday.
FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.
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